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Christie’s Compromise

Living in a coastal community in the California of the East Coast- liberal New Jersey- we have many things in common like a Republican governor, fiscal insanity, beaches and surfers. Chris Christie came into office and has had his way essentially thus far as concerns that fiscal insanity. To summarize to this point, he faced a $10 billion budget deficit- a daunting task considering (1) his promise of no tax increases and (2) the fact that the state constitution requires a balanced budget. He first declared a fiscal emergency which froze spending increases and salaries for state workers at current levels. About a third of the balancing act was to defer pension and health benefit contributions. Then the remainder was achieved through across the board decreases in spending from everything to education through park services. Democrats attempted to restore some spending through the so-called “millionaire’s tax,” which Christie promptly vetoed. Along the way, the public workers unions- especially the teacher’s union (the NJEA)- went nuclear in their attacks on Christie trying to portray him as uncaring and an enemy of children. He is famous for telling some blunt truths along the way and essentially smacking down opponents like flies with his verbiage. Although he has taken a hit in some polls, he is slowly winning the battle- largely on principle and sticking to it- in the public opinion polls of late.

When watching surfers at the beach, sometimes one notices that for whatever reason, they pull out of what seems like a good ride. I understand the wipe-outs, but voluntarily pulling out of a good ride? As an analogy, I see this tendency in Christie of late. All the measures he instituted and the austere budget were designed to address the short term financial mess in New Jersey. But the longer term, structural problems exist. They represent the very real potential for future fiscal crises in the State. Already, the State holds the dubious honor of being one of the most taxed states in the Nation and having the highest-in-the-Nation property taxes.

Four years ago, then Democratic Governor Jon Corzine instituted a 4% cap on property taxes. This amounted to political gimmickry. The “cap” was instituted in response to an increase in the sales tax from 6% to 7% with 1/2% dedicated to property tax relief. But, the cap was riddled with so many exceptions that it did not take long for local governments to find their way through the loopholes and exceptions. Many merely appealed to an unelected State commission that acted as a rubber stamp to violate the 4% cap.

The key Christie structural improvement proposal to reign in runaway spending was to institute a hard 2.5% increase cap on property taxes. This would then force the municipalities to think long term and act accordingly. The only way around the cap would be by voter approval. What a novel idea- allowing voters to decide to exceed the mandated cap. If circumstances dictated, for example, a 3.5% increase, then the local government would make their case to the voters, but it would be they to make the decision. No exceptions- no state authorities- just good old-fashioned American democracy in action!!!

Like a surfer on a wave on a good ride, for inexplicable reason, it is looking like he is kicking out and aborting the ride. In a recent address to a joint session of the Legislature, he said he is willing to accept a statuatory 2.5% cap- not a constitutional cap- provided there are few exceptions. This is the start of the compromise. Perhaps he started off with the proposed constitutionally-mandated 2.5% in order to gain concessions along the line. But here is what happens in these cases. First, the Democrats are quick to point out that under the Corzine 4% cap, property taxes increased, on average, 3.7% two years ago and 3.3% last year. This, they claim, is proof that a 4% cap works. But, they say, let’s throw Christie a bone and offer up a 2.9% cap, but with exceptions. For example, under the Democratic plan, exceptions could be made for increases in helath insurance and pensions. Also, they could be increased for educational purposes or for this great catch-all: if it affects the citizens’ “health, safety, and welfare.” That pretty much includes just about everything a government is responsible for. In other words, lets throw in an on-paper 2.9% cap but riddle it with so many exceptions and loopholes that it is moot. It is a goal. It achieves NOTHING! Instead, the residents of New Jersey can expect property tax increases.

Christie has said he rejects the 2.9%. He is, however, willing to accept the 2.5% statuatory cap with exceptions only for debt service. Then that changed to an exception for capital expenditures. He also is apparently dropping the voter override requirement of supermajority of voters (60%) to a simple majority of voters (1 person potentially). Opponents to Christie’s hard 2.5% constitutionally-mandated cap point to California’s Proposition 13 which tied the hands of local communities when it came to spending on education. Instead, they admire the Massachusetts cap that allows exceptions for educational spending and note that the Massachusetts schools have maintained their standards while California’s have dropped.

The problem with these compromises is that they are a slippery slope. The 3.3% average increase in property taxes state-wide in New Jersey are little help to the communities that saw 6 or 7% increases. The overall average makes little difference to specific communities. New Jersey has seen this before. The alleged progress noted by Democrats is still a disgrace. New Jersey still has the highest property taxes in the Nation no matter how you cut it. Considering that 201 mayors have signed on to Christie’s original proposal indicate support from both sides. The only way the State can get a handle on property taxes is not through compromise with the Democrats. They will only write in exceptions using amorphous criteria like the “health,” the “safety,” or the “welfare” of citizens.

The only true structural improvement is the constitutional solution. New Jersey has seen these gimmicks before. Christie had correctly, over six months of literally entering the lion’s den, framed the problem. This is a case of taxpayers versus the public worker’s unions, especially the NJEA. Their salaries and their benefit packages are the single leading driver of budgetary increases. Simply put, they must be reigned in. And Christie started the process, but now appears to be offering an olive branch and compromise. Unfortunately, in the past compromise has produced nothing but increased taxes and increased spending. He was on the right track and hopefully won’t jump off this wave prematurely.